By Dharmesh Shah
Equity benchmarks snapped 4 weeks winning streak amid subdued worldwide cues. Nifty concluded the week at 15683, down .7%. Broader market place reasonably underperformed as Nifty midcap and smaller cap lost 3% and 2%, respectively. Sectorally, barring FMCG, IT all other main indices ended in red weighed by Metal, Pharma, auto and PSE
Nifty technical outlook
– The Nifty undergone profit booking soon after clocking a fresh all time higher of 15901. The weekly value action formed a higher wave candle, indicating breather amid elevated volatility. The main profit booking seen the midcap and smaller caps
– In the expiry week, we anticipate index to consolidate in the broader variety of 15900-15400 amid stock precise action. The ongoing healthier consolidation would assist index to cool off the overbought circumstances and type a greater base. The broader structure stay bullish thereby we reiterate our positive stance of Nifty heading towards earmarked target of 16100. However, bouts of volatility from right here on can not be ruled out which would presents incremental obtaining chance in the variety of 15300-15500. Our target of 16100 is based on following observations:
a) Price parity of post Budget rally (13597-15432), projected from April low of 14151, at 16055
b) Past two month’s variety (15140-14150) breakout target at 16120
– On the sectoral front, we anticipate IT, FMCG to reasonably outperform whilst BFSI, Auto and Capital Goods provide favourable threat-reward setup
– Our preferred substantial caps are Infosys, Reliance Industries Ltd (RIL), Hindustan Unilever Ltd (HUL), Ambuja Cements, Bajaj Finance, HDFC Life Insurance Company, Tata Motors whilst, in midcaps we like Mindtree, Nocil, CSB Bank, Caplin Point, Indo Count Industries, Rallies India, NRB Bearing.
– In tandem with benchmark, broader market place indices underwent profit booking amid overbought circumstances. Over previous 4 weeks, Nifty midcap, smaller cap indices have rallied ~12% pulling weekly stochastic oscillator in overbought territory, indicating extended breather from right here on can not be ruled out
– Structurally, we think extended breather from right here on would get anchored about 15200. The Nifty has formed a sturdy greater base at 15200, which we do not anticipate to be breached. Thereby, traders need to take benefit of dips to accumulate high quality stocks. The crucial help of 15200 is based on 61.8% retracement of previous 4 week’s rally (14885-15901), at 15274
Bank Nifty Outlook
– The index witnessed profit booking for a second consecutive week and closed reduce by 1.4% amid soft worldwide cues. The weekly value action formed a higher wave candle, indicating breather amid elevated volatility soon after current sharp up move
– In the month-to-month expiry week, we anticipate the index to consolidate in the broad variety of 35500-34000 with stock precise action.
– The broader positive structure stay intact and we think the existing breather need to be made use of as an incremental obtaining chance in high quality banking stocks for up move towards our target of 36200 as it is the confluence of the 80% retracement of the whole last 3 months corrective decline (37708-30405) and the value parity with earlier up move (30405-34287) as projected from the current trough of 32115 signalling upside towards 36200 levels
– In a smaller sized time frame the index has witnessed a shallow retracement as it has currently taken 13 sessions to retrace just 50% of its preceding 12 sessions up move (32115-35714). A shallow retracement highlights a robust value structure and a greater base formation
– The index on last Friday’s session rebounded from the critical help location of 34000, which we anticipate to hold on a closing basis, as it is confluence of the following technical observations:
a. The 50% retracement of the earlier up move (32115-35714) placed at 33900
b. The worth of the increasing demand line joining lows of April 2021 and May 2021 is placed about 34300
c. The current breakout location and the April higher (34287).
d. The increasing 50 days EMA placed at 34150 levels
(Dharmesh Shah is the Head – Technical at ICICI Direct. Please seek advice from your monetary advisor prior to investing.)
ICICI Securities Limited is a SEBI registered Research Analyst getting registration no. INH000000990. It is confirmed that the Research Analyst or his relatives or I-Sec do not have actual/useful ownership of 1% or more securities of the topic business, at the finish of 22/04/2021 or have no other monetary interest and do not have any material conflict of interest. I-Sec or its associates may possibly have received any compensation towards merchant banking/ broking services from the topic businesses pointed out as customers in preceding 12 months